The World Bank Group has upgraded Kenya's 2026 growth forecast to 4.6 percent, up from 4.4 percent previously. This revision signals resilience in domestic output despite shocks from the Middle East conflict. The multilateral lender had earlier trimmed its growth outlook for Kenya from 5.3 percent to 4.4 percent in June. The initial projection was 4.9 percent in April, before the Israel-US war on Iran, which led to higher oil prices and a squeeze in inflows like diaspora remittances.
The World Bank attributes the slight improvement in economic output to high-frequency data showing resilience in long-term growth prospects amid near-term shocks. The upward revision of Kenya's growth aligns with projections of an overall lift in output across the Sub-Saharan African region. This is according to the World Bank's latest economic update published recently. The update highlights that Kenya's economy showed a strong first quarter ended March 2026, with growth accelerating to 5.3 percent from 4 percent in the comparable first quarter of 2025.
The Kenyan economy's expansion was supported by stronger domestic demand, easing financial conditions, robust tourism activity, and a recovery in industrial production. However, the economy has seen more downside risks since March, including a pickup in inflation from elevated global oil prices and a wider current account deficit. There was also a slowdown in diaspora remittances, which led to significant revisions to the country's economic output forecast by authorities, including the National Treasury and the Central Bank of Kenya.
The Central Bank of Kenya cut its economic growth forecast for 2026 by 0.4 percentage points to 4.9 percent, citing the implications of the war. The National Treasury trimmed its 2026 growth projection from 5.3 percent to a flat 5 percent. The World Bank expects Kenya to be slightly cushioned from setbacks like the slowdown in diaspora remittances, given the relatively smaller share of these inflows as a percentage of GDP.
The World Bank noted that while Kenya, Ethiopia, and Nigeria account for some of the largest remittance receipts from the Gulf in absolute terms, the macroeconomic impact of a disruption would be greatest in smaller and more fragile economies. These economies include the Gambia, South Sudan, Somalia, the Comoros, and Lesotho, where remittances constitute a significant share of GDP and an important source of household income, foreign exchange, and external financing.
The Kenyan economy grew at a slower rate of 4.6 percent in 2025 from 4.7 percent a year earlier, due to lower-than-expected output from the agriculture sector. The World Bank expects inflation to quicken, averaging 5.5 percent in 2026 from an earlier projection of 5 percent. This reflects the pickup in consumer prices from higher global oil prices. The budget deficit is also expected to expand to 6.1 percent of GDP from an earlier 5.6 percent projection.
The World Bank's forecast also indicates that Kenya's debt is seen reaching 71.1 percent of GDP from an earlier 70.3 percent outlook. Despite near-term operational and cost pressures, employment continued to expand, and business confidence reached a three-and-a-half-year high. This suggests that underlying demand remains resilient.
Key points
- The World Bank has upgraded Kenya's 2026 growth forecast to 4.6 percent.
- The Kenyan economy grew at a slower rate of 4.6 percent in 2025.
- The World Bank expects inflation to quicken, averaging 5.5 percent in 2026.